The Four Questions You Must Answer to Get Funding for CRM Projects


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CRM projects must not only be technically sound, but stand up to the question, “What will we get for our money?” CRM project leaders need to build their business case correctly or risk launching CRM initiatives with a low chance of delivering clear business results. Almost as bad, poor communication of anticipated payback can cause failure to gain funding for projects that would, in fact, provide strong benefits.

I talked with a CRM leader at large international pharmaceutical firm who built a business case to persuade senior management to invest in his project. He did many things well, but he failed in one critical way: although the project was estimated to have return on investment of nearly 50%, it did not receive funding. I used Forrester’s Total Economic ImpactTM (TEI) framework to understand what worked, and what went wrong.

You must have the answers to four questions before you start walking the hallways looking money for your project:

What are the business benefits?
In the case of the pharmaceutical company, sales executives estimated that they could improve the number of “details” (calls on doctors) by 5% per week with better processes and technology support. The project included elements of sales force automation, better coordination with the Medical Affairs service (call center) group, integration of communications via the internet, and better customer data analytics to improve targeting of physicians. The metric for success was to move the number of details from 1100/salesperson/year (baseline) to 1150/year. This would yield between $6 million and $8 million in additional revenue annually.

What is the impact on IT or project costs?
For this company, CRM user licenses, server licenses, servers, and mobile devices for the sales organization amounted to 25% of total project costs. The biggest costs associated with CRM, or any software-centric business improvement initiative, are expenditures associated with selecting, configuring, deploying, and maintaining the new technology. These items accounted for over 50% of estimated project costs. They also discovered the company needed to make an incremental investment in company infrastructure to support the new CRM components. This amounted to nearly 25% of total project cost.

What future flexibility is created or decreased?
Flexibility can be looked at as the value of the option to take a second or third action in the future. In the case of the pharmaceutical company, an investment of millions of dollars was required to deliver new capabilities for 150 sales representatives. While this was a considerable sum, senior management felt that the outlay would provide a flexible platform adaptable to other departments and market opportunities. For example, the CRM platform to support the sales team could also be use to support the Medical Affairs department, a call center-centric department.

What are the risks and uncertainties?
Project risks were to be mitigated by breaking the scheme into distinct phases. Core sales force automation tools would be followed later by adding mobile device communications capability. Then, the Medical Affairs call center would be integrated with the system, followed by installation of more robust customer data analytics capabilities. The project was conservatively forecast to drive a modest increase in (high margin) drug sales, delivering a “risk adjusted” ROI of nearly 50%, over five years.

Although the pharmaceutical company CRM champion developed a business case that adhered to most of the key tenets of TEI, he did not succeed in gaining funding for the project. His critical failure was inability to get the “business owners” for the project (the Sale Management team) to accept accountability for increases in sales revenue. The projected sales increases were credible with sales team executives, but they were very sensitive about actually adjusting sales quotas upward.

Short term, this was a sound decision. A failure to establish clear accountability for the benefits defined in the business case is a precursor to low user adoption and project disappointment. However, by failing to invest in a project with high potential returns, the company now lags other pharmaceutical companies. The company bears a high opportunity cost by failing seize on an innovative way to build sales.

William Band
Bill Band is a vice president and principal analyst at Forrester Research. He is a leading expert on CRM topics, having helped organizations define customer-driven strategies to achieve distinction in the marketplace for his entire career. Click here to download free related research from Forrester (free site registration required).


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